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ACQUISITIONS AND OTHER (Block) | 6 Months Ended
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Jun. 30, 2018
Business Combinations [Abstract] |
Mergers Acquisitions And Dispositions Disclosures Text Block | 2. BUSINESS COMBINATIONS The Company records acquisitions under the acquisition method of accounting, and allocates the purchase price to the assets and liabilities based upon their respective fair values as determined as of the acquisition date. Merger and acquisition costs are excluded from the purchase price as these costs are expensed for book purposes and amortized for tax purposes. 2018 Emmis Acquisition On April 30, 2018, the Company completed a transaction to acquire two radio stations in St. Louis, Missouri from Emmis Communications Corporation (“Emmis”) for a purchase price of $15.0 million in cash (the “Emmis Acquisition”). The Company borrowed under its revolving credit facility (the “Revolver”) to fund the acquisition. With this acquisition, the Company will increase its presence in St. Louis, Missouri, to five radio stations. On March 1, 2018, the Company entered into a n asset purchase agreement and a time brokerage agreement (“TBA”) with Emmis to operate two radio stations. During the period of the TBA, the Company included in net revenues, station operating expenses and monthly TBA fees associated with operating these stations in the Company’s consolidated financial statements. The allocations presented in the table below are based upon management’s estimate of the fair values using valuation techniques including income, cost and market approaches. In estimating the f air value of the acquired FCC broadcasting licenses, the fair value estimates are based on, but not limited to, expected future revenue and cash flows that assume an expected future growth rate of 1.0% and an estimated discount rate of 9.0%. The gross profit margins utilized were considered appropriate based on management’s expectations and experience in equivalent sized markets. The Company determines the fair value of the broadcasting licenses by relying on a disc ounted cash flow approach assuming a start-up scenario in which the only assets held by an investor are broadcasting licenses. The Company’s fair value analysis contains assumptions based upon past experience, reflects expectations of industry observers a nd includes judgments about future performance using industry normalized information for an average station within a certain market. Any excess of the purchase price over the assets acquired was reported as goodwill. The following preliminary purchase pri ce allocations are based upon the valuation of assets and these estimates and assumptions are subject to change as the Company obtains additional information during the measurement period, which may be up to one year from the acquisition date. These asset s pending finalization include intangible assets. Differences between the preliminary and final valuation could be substantially different from the initial estimates.
|  |  |  | Useful Lives in Years
Description |  | April 30, 2018 |  | From |  | To
|  | (amounts in thousands) |  |  |
Assets |  |  |  |  |  |  |
Equipment |  | $ | 1,558 |  | 3 |  | 7
Total tangible property |  |  | 1,558 |  |  |  |
Advertiser relationships |  |  | 207 |  | 5 |  | 15
Advertising contracts |  |  | 114 |  | 1 |  | 1
Radio broadcasting licenses |  |  | 12,785 |  | non-amortizing
Goodwill |  |  | 332 |  | non-amortizing
Other noncurrent assets |  |  | 4 |  | 2 |  | 2
Total intangible and other assets |  |  | 13,442 |  |  |  |
Total assets |  | $ | 15,000 |  |  |  |
Preliminary fair value of assets acquired |  | $ | 15,000 |  |  |  |
2017 CBS Radio Business Acquisition On November 17, 2017, the Company acquired the CBS Radio business from CBS to further strengthen its scale and capabilities to compete more effectively with other media for a larger share of advertising dollars. The purchase price was $2.56 billion and consisted of $1.17 billion of total equity consideration and $1.39 billion of assumed debt. The CBS Radio business acquisition was completed pursuant to the CBS Radio Merger Agreement, dated February 2, 2017, by and among the Company, CBS, CBS Radio, and Merger Sub. On November 17, 2017, (i) Merger Sub was merged with and into CBS Radio, with CBS Radio continuing as the surviving corporation and a direct, wholly-owned subsidiary of the Company and (ii) each share of CBS Radio common stock was converted into one share of the Company’s common stock. The Company issued 101,407,494 shares of its Class A common Stock to the former holders of CBS Radio common stock. At the time of the Merger, each outstanding restricted stock unit (“RSU”) and stock option with respect to CBS Class B common stock held by employees of CBS Radio was canceled and convert ed into equity awards for the Company’s Class A common stock. The conversion was based on the ratio of the volume-weighted average per share closing prices of CBS stock on the five trading days prior to the date of acquisition and the Company’s stock on t he five trading days following the date of acquisition. Entercom Communications Corp. is considered to be the acquiring company for accounting purposes. To complete the Merger, certain divestitures were required by the FCC in order to comply with the FC C’s ownership rules and policies. These divestitures consisted of: (i) the exchange transaction with iHeartMedia, Inc. (“iHeart”); (ii) the exchange transaction with Beasley Broadcast Group, Inc. (“Beasley”); (iii) entry into a local marketing agreement (“LMA”) with Bonneville International Corporation (“Bonneville”); and (iv) a cash sale to Educational Media Foundation (“EMF”). Due to the structure of the transaction, there is no step-up in tax basis for the assets acquired as the Company will assume t he existing tax basis of CBS Radio. The absence of a step-up in tax basis will limit the Company’s tax deductions in future years and impacts the amount of deferred tax liabilities recorded as part of purchase price accounting. If any of the Internal Dis tributions or the Final Distribution, each as defined in the CBS Radio Merger Agreement, does not qualify as a transaction that is tax-free for U.S. federal income tax purposes under Section 355 of the Internal Revenue Code (“Code”) or the Merger does not qualify as a tax-free “reorganization” under Section 368(a) of the Code, including as a result of actions taken in connection with the distributions made by CBS to facilitate the Merger or as a result of subsequent acquisitions of shares of CBS, Entercom, or CBS Radio, then CBS and/or holders of CBS Common Stock that received Radio Common Stock in the Final Distribution may be required to pay substantial U.S. federal income taxes, and, in certain circumstances, CBS Radio and Entercom may be required to inde mnify CBS for any such tax liability. The allocations presented in the table below are based upon management’s estimate of the fair values using valuation techniques including income, cost and market approaches. In estimating the fair value of the acquired FCC broadcasting licenses, the fair value estimates are based on, but not limited to, hypothetical expected future revenue and cash flows that assume an expected future growth rate of 1.0% and an estimated discount rate of 9.0%. The gross profit margins utilized were considered appropriate based on management’s expectations and experience in equivalent sized markets. The Company determines the fair value of the broadcasting licenses by relying on a discounted ca sh flow approach assuming a start-up scenario in which the only assets held by an investor are broadcasting licenses. The Company’s fair value analysis contains assumptions based upon past experience, reflects expectations of industry observers and include s judgments about future performance using industry normalized information for an average station within a certain market. Any excess of the purchase price over the net assets acquired was reported as goo dwill. The goodwill recorded reflects management’s expectations of its ability to gain access to and penetrate CBS Radio’s customer base and the benefits of being able to leverage operational efficiencies with favorable growth opportunities as a results of a large national presence. A portion of the goodw ill carryover basis is tax deductible. The Company’s preliminary allocation of the purchase price to the assets acquired and liabilities assumed as of the acquisition date, including measurement period adjustments, is outlined below.
|  | Preliminary Value |  |  |  |  |  |
|  | as of acquisition date |  |  |  |  |  |
|  | (as previously |  | Measurement |  |  |
|  | reported as of |  | period |  |  |
Description |  | December 31, 2017) |  | Adjustment |  | As Adjusted
|  | (amounts in thousands)
Assets |  |  |  |  |  |  |  |  |
Accounts receivable |  | $ | 241,548 |  | $ | - |  | $ | 241,548
Prepaid sports rights and favorable sports contracts |  |  | 4,160 |  |  | - |  |  | 4,160
Prepaid expenses, deposits and other |  |  | 20,625 |  |  | 476 |  |  | 21,101
Other current assets |  |  | 7,350 |  |  | 1,741 |  |  | 9,091
Total current assets |  |  | 273,683 |  |  | 2,217 |  |  | 275,900
Land |  |  | 112,880 |  |  | - |  |  | 112,880
Land improvements |  |  | 3,988 |  |  | (2,640) |  |  | 1,348
Leasehold improvements |  |  | 26,255 |  |  | 9,774 |  |  | 36,029
Buildings |  |  | 19,246 |  |  | (5,206) |  |  | 14,040
Furniture and fixtures |  |  | 10,929 |  |  | (6,849) |  |  | 4,080
Equipment and towers |  |  | 76,486 |  |  | 4,921 |  |  | 81,407
Construction in process |  |  | 14,598 |  |  | - |  |  | 14,598
Total tangible property |  |  | 264,382 |  |  | - |  |  | 264,382
Advertiser relationships |  |  | 27,453 |  |  | - |  |  | 27,453
Radio broadcasting licenses |  |  | 1,880,400 |  |  | - |  |  | 1,880,400
Goodwill |  |  | 820,961 |  |  | (4,401) |  |  | 816,560
Assets held for sale |  |  | 255,650 |  |  | - |  |  | 255,650
Favorable leases |  |  | 16,580 |  |  | - |  |  | 16,580
Other noncurrent assets |  |  | 1,050 |  |  | 1,926 |  |  | 2,976
Total intangible and other assets |  |  | 3,002,094 |  |  | (2,475) |  |  | 2,999,619
Total assets |  | $ | 3,540,159 |  | $ | (258) |  | $ | 3,539,901
Liabilities |  |  |  |  |  |  |  |  |
Accounts payable |  | $ | 36,137 |  | $ | 421 |  | $ | 36,558
Accrued expenses |  |  | 35,154 |  |  | 344 |  |  | 35,498
Accrued salaries and benefits |  |  | 26,324 |  |  | - |  |  | 26,324
Current portion of long-term debt |  |  | 10,600 |  |  | - |  |  | 10,600
Unfavorable sports liability - current portion |  |  | 4,803 |  |  | - |  |  | 4,803
Accrued interest |  |  | 4,529 |  |  | - |  |  | 4,529
Unearned revenues - current portion |  |  | 14,971 |  |  | - |  |  | 14,971
Total current liabilities |  |  | 132,518 |  |  | 765 |  |  | 133,283
Unearned revenues - non-current portion |  |  | 13,859 |  |  | - |  |  | 13,859
Unfavorable lease liability |  |  | 12,770 |  |  | - |  |  | 12,770
Unfavorable sports liability - non-current portion |  |  | 22,597 |  |  | - |  |  | 22,597
Non-current portion of long-term debt |  |  | 1,376,900 |  |  | - |  |  | 1,376,900
Deferred tax liability |  |  | 780,832 |  |  | (2,949) |  |  | 777,883
Other long-term liabilities |  |  | 31,835 |  |  | 1,926 |  |  | 33,761
Total liabilities |  | $ | 2,371,311 |  | $ | (258) |  | $ | 2,371,053
Preliminary fair value of net assets acquired |  | $ | 1,168,848 |  | $ | - |  | $ | 1,168,848
The aggregate fair value purchase price allocation of the assets and liabilities acquired in the CBS Radio Merger as reported on the Company’s Form 10-K filed with the SEC on March 16, 2018, were revised during the six months ended June 30, 2018 due to: (i) a change to the deferred tax liabilities associated with certain stations acquired in the CBS Radio Merger which resulted in a decrease to goodwill of $2.9 million; (ii) a change to other current assets acquired in the CBS Radio Merger which resulted in a decrease to goodwill of $1.7 million; (iii) a change to prepaid assets acquired in the CBS Radio Merger which resulted in a decrease to goodwill of $0.5 million; (iv) a change to accrued expenses acquired in the CBS Radio Merger which resulted in a incre ase to goodwill of $0.3 million; (v) the recording of current and noncurrent lease abandonment liabilities and a corresponding receivable for reimbursement from CBS Corporation; and (v i) reclassification between the categories of acquired tangible property. The preliminary purchase price allocations are based upon the valuation of assets and liabilities and these estimates and assumptions are subject to change as the Company obtains additional information during the measurement period, which may be up to o ne year from the acquisition date. These assets and liabilities pending finalization include intangible assets and liabilities. Differences between the preliminary and final valuation could be substantially different from the initial estimates. 2017 Local Marketing Agreement: The Bonneville Transaction On November 1, 2017, the Company assigned assets to a trust and the trust subsequently entered into two LMAs with Bonneville. The LMAs, which were effective upon the closing of the Merger, allow Bonneville to operate eight radio stations in the San Francisco, California and Sacramento, California markets. Of the eight radio stations to be operated by Bonneville, three were originally owned by the Company and the remaining five were originally own ed by CBS Radio. The Company conducted an analysis and determined the assets of the eight stations satisfied the criteria to be presented as assets held for sale at June 30, 2018. The stations which were acquired from CBS Radio and were never operated by the Company are included within discontinued operations. Refer to Note 11, Assets Held f or Sale a nd Discontinued Operations, for additional information. Restructuring Charges Restructuring charges were expensed as a separate line item in the consolidated statements of operations. The components of restructuring charges are as follows:
| Six Months Ended
| June 30,
| 2018 |  | 2017
| (amounts in thousands)
Costs to exit duplicative contracts | $ | 510 |  | $ | -
Workforce reduction |  | 928 |  |  | -
Lease abandonment costs |  | 257 |  |  | -
Other restructuring costs |  | 472 |  |  | -
Total restructuring charges | $ | 2,167 |  | $ | -
| Three Months Ended
| June 30,
| 2018 |  | 2017
| (amounts in thousands)
Costs to exit duplicative contracts | $ | 349 |  | $ | -
Workforce reduction |  | 337 |  |  | -
Total restructuring charges | $ | 686 |  | $ | -
During the fourth quarter of 2017, the Company initiated a restructuring plan as a result of the integration of the CBS Radio stations acquired in November 2017. The restructuring plan included: (i) a workforce reduction and realignment charges that included one-time termination benefits and related costs; (ii) lease abandonment costs; and (iii) costs associated with realigning radio stations within the overlap markets between CBS Radio and the Company. The Company could incur addit ional restructuring costs in the remainder of 2018 under this plan, however, these costs cannot be determined at this time. The estimated amount of unpaid restructuring charges as of June 30, 2018 includes amounts in accrued expenses that are expected to be p aid in less than one year and long-term restructuring costs for lease abandonment costs covering the remaining non-cancellable lease term.
| Six |  | Twelve
| Months Ended |  | Months Ended
| June 30, |  | December 31,
| 2018 |  | 2017
| (amounts in thousands)
Restructuring charges and lease abandonment costs, beginning balance | $ | 16,086 |  | $ | 650
Additions resulting from the integration of CBS Radio |  | 2,167 |  |  | 15,005
Restructuring charges assumed from the Merger |  | - |  |  | 1,095
Payments |  | (9,374) |  |  | (664)
Restructuring charges and lease abandonment costs unpaid and outstanding |  | 8,879 |  |  | 16,086
Restructuring charges and lease abandonment costs - noncurrent portion |  | (1,647) |  |  | (4,413)
Restructuring charges and lease abandonment costs - current portion | $ | 7,232 |  | $ | 11,673
Integration Costs The Company incurred integration costs of $19.2 million and $9.5 million during the six months and three months ended June 30, 2018, respectively. Integration costs were expensed as a separate line item in the consolidated statements of operations. Thes e costs primarily relate to change management consultants and technology-related costs. Unaudited Pro Forma Summary Of Financial Information The following pro forma information presents the consolidated results of operations as if: (i) the business combinations in 2018 had occurred as of January 1, 2017, after giving effect to certain adjustments, including: (a) depreciation and amortization of assets; (b) change in the effective tax rate; and (c) merger and acquisition costs; and (ii) the business combinations in 2017 had occurred as of January 1, 2016, after giving effect to certain adjustments, including: (a) depreciation and amortization of assets; (b) amortization of unfavorable contracts related to the fair value adjustments of the assets acquired; (c) change in the effective tax rate; (d) interest expense on any debt incurred to fund the acquisitions which would have been incurred had such acquisitions occurred as of January 1, 2016; and (e) merger and acquisition costs. For purposes of this presentation, the pro forma data excludes stations divested to iHeart and Beasley in the iHeartMedia Transaction and the Beasley Transaction as these stations were exchanged for the radio stations acquired in the Chattanooga, Richmond and Boston markets. For the eight radio stations operated by Bonneville under two LMAs, the results for the three and six months ended June 30, 2017 are reflected in income from continuing operations. For the three and six months ended June 30, 2018: (i) the results of three of these eight radio stations are reflected in income from continuing operations; and (ii) the results of five of these eight radio stations (which the Company never owned or operated) are reflected in income from discontinued operations. Refer to Note 11, Assets Held Fo r Sale And Discontinued Operations, for additional discussion on the classification for certain of these radio stations within discontinued operations. In addition, the pro forma data includes: (i) the stations acquired in the Richmond, Virginia and Chat tanooga, Tennessee markets in the iHeartMedia Transaction; (ii) the station acquired in the Beasley Transaction; (iii) the CBS Radio stations acquired in the Merger (except as otherwise separately excluded as described above); and (iv) the stations acquire d in Charlotte, North Carolina. These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions been made as of that date or results which may occur in the future.
| Three Months Ended |  | Six Months Ended
| June 30, |  | June 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
| (amounts in thousands except share and per share data)
| Pro Forma |  | Pro Forma |  | Pro Forma |  | Pro Forma
Net revenues | $ | 372,124 |  | $ | 426,728 |  | $ | 674,131 |  | $ | 768,622
Income (loss) from continuing operations | $ | 2,090 |  | $ | 39,451 |  | $ | (11,075) |  | $ | 45,696
Income (loss) from discontinued operations | $ | 844 |  | $ | - |  | $ | 1,172 |  | $ | -
Net income (loss) available to the Company | $ | 2,934 |  | $ | 39,451 |  | $ | (9,903) |  | $ | 45,696
Net income (loss) available to common shareholders | $ | 2,934 |  | $ | 38,901 |  | $ | (9,903) |  | $ | 44,596
Income (loss) from continuing operations |  |  |  |  |  |  |  |  |  |  |
per common share - basic | $ | 0.02 |  | $ | 0.28 |  | $ | (0.08) |  | $ | 0.33
Income (loss) from discontinued operations |  |  |  |  |  |  |  |  |  |  |
per common share - basic | $ | 0.01 |  | $ | - |  | $ | 0.01 |  | $ | -
Net income (loss) available to common shareholders |  |  |  |  |  |  |  |  |  |  |
per common share - basic | $ | 0.02 |  | $ | 0.28 |  | $ | (0.07) |  | $ | 0.32
Income (loss) from continuing operations |  |  |  |  |  |  |  |  |  |  |
per common share - diluted | $ | 0.02 |  | $ | 0.28 |  | $ | (0.08) |  | $ | 0.32
Income (loss) from discontinued operations |  |  |  |  |  |  |  |  |  |  |
per common share - diluted | $ | 0.01 |  | $ | - |  | $ | 0.01 |  | $ | -
Net income (loss) available to common shareholders |  |  |  |  |  |  |  |  |  |  |
per common share - diluted | $ | 0.02 |  | $ | 0.28 |  | $ | (0.07) |  | $ | 0.32
Weighted shares outstanding basic |  | 138,638,554 |  |  | 140,352,114 |  |  | 138,961,728 |  |  | 140,342,655
Weighted shares outstanding diluted |  | 139,263,363 |  |  | 141,063,093 |  |  | 138,961,728 |  |  | 141,368,209
Conversion of preferred stock for dilutive purposes |  |  |  |  |  |  |  |  |  |  |
under the as if method | Not applicable |  | anti-dilutive |  | Not applicable |  | anti-dilutive

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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